American Seniors Holding More Debt

America’s seniors are becoming more likely to fall into debt — and saw the biggest jump in borrowing relative to other groups over the past decade.

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The median level of debt among households led by someone 65 and older — the level at which 50% of older households are above and 50% are below — more than doubled between 2000 and 2011 from roughly $12,000 to $26,000, according to a U.S. Census Bureaureport released Thursday. While that might not sound like a lot of debt, America’s seniors saw a much bigger jump in percentage terms than any other age group.

The report raises concerns about the financial health of older Americans at a time when more are worried they lack the savings and investments to retire comfortably. The recession took a bite out of many seniors’ nest eggs, mainly through plummeting home values. Meanwhile, fewer Americans are saving as much for retirement even though pensions are disappearing. And the Federal Reserve’s strategy for spurring the economy — low interest rates — has the unintended impact of reducing returns for seniors on safe investments like U.S. Treasury bonds.

It’s true that older Americans tend to be wealthier and survived the housing crash in better shape, so they can handle more debt. Younger people still owe more relative to their incomes than older people. Seniors are also staying in the labor force longer, making paying off debt easier. And Americans’ debt payments are actually at their lowest level in decades relative to disposable income.

It’s also not just seniors. People ages 55 to 64 saw their typical or median household debt rise 64% to $70,000. Younger people are borrowing much more to pay for college. Those under 35 saw their typical debt rise 13% and people between 35 and 44 saw their own climb 25%. Overall, the typical U.S. household’s debt rose 37% between 2000 and 2011 to $70,000.

Still, the new figures show American seniors have grown much more likely to be in debt — even as other groups have become less likely to have debt. People 65 and older were more likely, for example, to have a mortgage in 2011 compared to 2000, while people under 55 were less likely to have a mortgage — or any debt. For seniors, the typical level of “secured” debt — including mortgages — jumped from around $25,000 to $50,000.

Older households “are less likely to own their homes free and clear than was once the case,” said Richard Fry, a researcher at the Pew Research Center. Increased homeownership by seniors may explain some of the jump, but older Americans over the past decade also ramped up their use of “home-equity” loans, where consumers borrow against the equity in their homes, he said.

Heavier debt loads could make it harder for seniors to finance their retirement — especially since they’re already struggling with nest eggs cracked by the recession. The median net worth of American households — the value of assets like homes and stocks, minus debts — was around $69,000 in 2011 compared with $82,000 in 2000 and $107,000 in 2005. In a report on family finances in June 2012, the Federal Reserve noted that the median outstanding debt of American families was largely unchanged between 2007 and 2010 but “one consistent impression from the data” was a “marked increase in the amount of debt held by older families.”

This is the first time the Census Bureau has used data from its Survey of Income and Program Participation to crunch numbers on Americans’ debts. Census researchers also found that only 69% of U.S. households had any debt in 2011, compared with 74% in 2000. People in the West had the sharpest changes in net worth between 2000 and 2011. Americans were much less likely to hold credit-card debt over the period, and were more likely to have other “unsecured” debt, especially education loans.

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